US Internal Revenue Service: i8582cr--1996

8/14/2019 US Internal Revenue Service: i8582cr--1996

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96Department of the TreasuryInternal Revenue Service

Instructions for Form 8582-CRPassive Activity Credit LimitationSection references are to the Internal Revenue Code unless otherwise noted.

Paperwork ReductionAct NoticeWe ask for the information on this form to carryout the Internal Revenue laws of the UnitedStates. You are required to give us theinformation. We need it to ensure that you arecomplying with these laws and to allow us tofigure and collect the right amount of tax.

You are not required to provide theinformation requested on a form that is subjectto the Paperwork Reduction Act unless theform displays a valid OMB control number.Books or records relating to a form or itsinstructions must be retained as long as theircontents may become material in theadministration of any Internal Revenue law.Generally, tax returns and return information

are confidential, as required by section 6103.The time needed to complete and file thisform will vary depending on individualcircumstances. The estimated average time is:

If you have comments concerning theaccuracy of these time estimates orsuggestions for making this form simpler, wewould be happy to hear from you. See theinstructions for the tax return with which thisform is filed.

General Instructions

Purpose of FormForm 8582-CR is used by noncorporatetaxpayers to figure the amount of any passiveactivity credit for the current tax year (includingany prior year unallowed credits) and theamount of credit allowed for the current year.It is also used to make the election to increasethe basis of credit property when a taxpayerdisposes of his or her interest in an activity.

Passive activity credits that are not allowedin the current year are carried forward until theyare allowed against the tax on either netpassive income or the special allowance, ifapplicable.

Different rules apply to your activities andthe related credit, depending on the type ofactivity. Generally, passive activities includetrade or business activities in which you did notmaterially participate for the tax year, andrental activities regardless of your participation.See Trade or Business Activities on page 3and Rental Activities on page 2.Note: Corporations subject to the passiveactivity rules must useForm 8810, CorporatePassive Activity Loss and Credit Limitations.

Who Must FileForm 8582-CR is filed by individuals, estates,and trusts who have any of the following creditsfrom passive activities:q Investment credit (including the rehabilitationcredit, energy credit, and reforestation credit);q Work opportunity credit;q Credit for alcohol used as fuel;q Credit for increasing research activities;q Low-income housing credit;q Enhanced oil recovery credit;q Disabled access credit;q Renewable electricity production credit;q Empowerment zone employment credit;q Indian employment credit;q Credit for employer social security andMedicare taxes paid on certain employee tips;

q Orphan drug creditq Credit for contributions to selectedcommunity development corporations;q Nonconventional source fuel credit; andq Qualified electric vehicle credit.

Overview of FormThe form consists of six parts.

Part I1996 Passive ActivityCreditsUse Part I to combine your credits from passiveactivities to determine if you have a passiveactivity credit for 1996.

If your credits from all passive activitiesexceed the tax attributable to net passive

income, you will have a passive activity creditfor 1996. Generally, you have net passiveincome if line 3 of Form 8582, Passive ActivityLoss Limitations, shows income. See theinstructions for line 6 of Form 8582-CR on page8 for other details.

Part IISpecial Allowance forRental Real Estate Activities WithActive ParticipationUse Part II to figure the credit allowed if youhave any credits from rental real estateactivities in which you actively participated(other than rehabilitation credits andlow-income housing credits). See RentalActivities on page 2 for details.

Part IIISpecial Allowance forRehabilitation Credits From RentalReal Estate Activities andLow-Income Housing Credits forProperty Placed in Service Before1990 (or From Pass-ThroughInterests Acquired Before 1990)Use Part III to figure the credit allowed if youhave any rehabilitation credits or low-incomehousing credits for property placed in servicebefore 1990. Also use this part if yourlow-income housing credit is from apartnership, S corporation, or other

pass-through entity in which you acquired your

interest before 1990, regardless of the date theproperty was placed in service.

Part IVSpecial Allowance forLow-Income Housing Credits forProperty Placed in Service After1989Use Part IV to figure the credit allowed if youhave any low-income housing credits forproperty placed in service after 1989. If youheld an indirect interest in the property througha partnership, S corporation, or otherpass-through entity, use this part only if yourinterest in the pass-through entity was alsoacquired after 1989.

Part VPassive Activity Credit

AllowedUse Part V to figure the passive activity credit(as determined in Part I) that is allowed for1996 for all passive activities.

Part VIElection to Increase Basisof Credit PropertyComplete Part VI if you disposed of your entireinterest in a passive activity and elect toincrease the basis of the credit property usedin the activity by the unallowed credit thatreduced the basis of the property.Note: Before reading the instructions thatfollow, seeExample of How To CompleteForm 8582-CR, beginning on page 4. Theexample goes through a four-step analysis ofhow the form and worksheets should becompleted for a partner in a limited partnershipthat has a low-income housing credit. Thisexample may provide enough information tocomplete the form and worksheets withoutreading all of the instructions.

Activities That Are NotPassive ActivitiesThe following are not passive activities:1. Trade or business activities in which youmaterially participated for the tax year.2. Any rental real estate activity in which youmaterially participated, if you were a realestate professional for the tax year. You werea real estate professional only if you met bothof the following conditions:a. More than half of the personal services

you performed in trades or businesses wereperformed in real property trades or businessesin which you materially participated, andb. You performed more than 750 hours ofservices in real property trades or businessesin which you materially participated.

For purposes of this rule, each interest inrental real estate is a separate activity, unlessyou elect to treat all interest in rental real estateas one activity.

If you were married filing jointly, either youor your spouse must separately meet both ofthe above conditions without taking intoaccount services performed by the otherspouse.

Recordkeeping ................. .................. .. 2 hr., 5 min.

Learning about the law or the form .. 4 hr., 22 min.

Preparing the form ................ .............. 3 hr., 25 min.

Copying, assembling, and sendingthe form to the IRS.............................. 2 hr., 18 min.

Cat. No. 64649B


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A real property trade or business is any realproperty development, redevelopment,construction, reconstruction, acquisition,conversion, rental, operation, management,leasing, or brokerage trade or business.Services you performed as an employee arenot treated as performed in a real propertytrade or business unless you owned more than5% of the stock (or more than 5% of the capitalor profits interest) in the employer.3. A working interest in an oil or gas well, ifyour working interest was held directly orthrough an entity that did not limit your liability(such as a general partner interest in a

partnership). In this case, it does not matterwhether you materially participated in theactivity for the tax year.

If, however, your liability was limited for partof the year (e.g., you converted your generalpartner interest to a limited partner interestduring the year), some of your income andlosses from the working interest may be treatedas passive activity gross income and passiveactivity deductions. See TemporaryRegulations section 1.469-1T(e)(4)(ii).4. The rental of a dwelling unit you used asa residence if section 280A(c)(5) applies. Thissection applies if you rented out a dwelling unitthat you also used as a home during the yearfor a number of days that exceeds the greaterof 14 days or 10% of the number of days duringthe year that the home was rented at a fair

rental.5. An activity of trading personal property forthe account of owners of interests in theactivity. See Temporary Regulations section1.469-1T(e)(6).

Credits from activities that are not passiveactivities should not be entered on Form8582-CR. However, they may be subject tolimitations other than the passive credit rules.

Rental ActivitiesA rental activity is a passive activity even if youmaterially participated in the activity (other thana rental real estate activity in which youmaterially participated, if you were a real estateprofessional).

However, if you meet any one of the six

exceptions listed below, the rental of theproperty is not treated as a rental activity. SeeReporting Credits From the Activities belowif you meet any of the exceptions.

An activity is a rental activity if tangibleproperty (real or personal) is used bycustomers or held for use by customers, andthe gross income (or expected gross income)from the activity represents amounts paid (orto be paid) mainly for the use of the property.It does not matter whether the use is under alease, a service contract, or some otherarrangement, it is still considered a rentalactivity.

ExceptionsAn activity is not a rental activity if:1. The average period of customer use ofthe rental property is 7 days or fewer.

Figure the average period of customer usefor a class of property by dividing the totalnumber of days in all rental periods by thenumber of rentals during the tax year. If theactivity involves renting more than one classof property, multiply the average period ofcustomer use of each class by the ratio of thegross rental income from that class to theactivity's total gross rental income. Theactivity's average period of customer useequals the sum of these class-by-class averageperiods weighted by gross income. SeeRegulations section 1.469-1(e)(3)(iii).

2. The average period of customer use(defined above) of the rental property is 30days or less, and significant personalservices were provided in making the rentalproperty available for customer use.

Significant personal services include onlyservices performed by individuals. Indetermining if personal services are significant,all the relevant facts and circumstances areconsidered. Facts and circumstances includethe frequency of the services, the type andamount of labor required to perform theservices, and the value of the services relativeto the amount charged for the property's use.

3. Extraordinary personal services wereprovided in making the rental property availablefor customer use.

Services provided in making rental propertyavailable for customer use are extraordinarypersonal services only if they are performedby individuals, and the customers' use of therental property is incidental to their receipt ofthe services.4. The rental of the property is incidental toa nonrental activity.

The rental of property is incidental to anactivity of holding property for investment if themain purpose of holding the property is torealize a gain from its appreciation, and thegross rental income is less than 2% of thesmaller of the unadjusted basis or the fairmarket value of the property.

Unadjusted basis means the cost of theproperty without regard to depreciationdeductions or any other basis adjustmentdescribed in section 1016 that reduces basis.

The rental of property is incidental to atrade or business activity if:a. You own an interest in the trade orbusiness activity during the tax year;b. The rental property was mainly used inthe trade or business activity during the taxyear or during at least 2 of the 5 preceding taxyears; andc. The gross rental income from the propertyis less than 2% of the smaller of the unadjustedbasis or the fair market value of the property.

Lodging provided for the employer'sconvenience to an employee or the employee's

spouse or dependents is incidental to theactivity or activities in which the employeeperforms services.5. You customarily make the rental propertyavailable during defined business hours fornonexclusive use by various customers.6. You provide property for use in anonrental activity of a partnership, an Scorporation, or joint venture in your capacity asan owner of an interest in such partnership, Scorporation, or joint venture.

Reporting Credits From theActivitiesIf you meet any of the six exceptions listedabove, your rental of the property is not a rentalactivity. You then must determine whether yourrental of the property is a trade or businessactivity and, if so, whether you materiallyparticipated in the activity for the tax year (seeTrade or Business Activities and MaterialParticipation on page 3). If the activity is atrade or business activity in which you did notmaterially participate, enter the credits from theactivity in Worksheet 4 on page 10.

If you meet any of the six exceptions listedabove, and the activity is a trade or businessactivity in which you materially participated,report the credits from the activity on the formyou normally use.

If you did not meet any of the sixexceptions, the rental activity is generally apassive activity. Special rules apply if you

conduct the rental activity through a publiclytraded partnership (PTP). See PubliclyTraded Partnerships (PTPs) on page 13. Ifthe rental activity is not conducted through aPTP, the passive rental activity is entered inWorksheet 1, 2, 3, or 4 on pages 9 and 10.

Worksheet 1 is for credits (other thanrehabilitation credits and low-income housingcredits) from passive rental real estate activitiesin which you actively participated. However,married individuals who file separate taxreturns but did not live apart at all times duringthe tax year must use Worksheet 4 even ifthere was active participation.

Worksheet 2 is for rehabilitation credits frompassive rental real estate activities andlow-income housing credits for property placedin service before 1990. This worksheet is alsoused for low-income housing credits from apartnership, S corporation, or otherpass-through entity if your interest in thepass-through entity was acquired before 1990,regardless of the date the property was placedin service.

Worksheet 3 is for low-income housingcredits for property placed in service after 1989(unless held through a pass-through entity inwhich you acquired your interest before 1990).

Worksheet 4 is for credits from passive tradeor business activities in which you did notmaterially participate and passive rental realestate activities without active participation (but

not rehabilitation credits from passive rentalreal estate activities and low-income housingcredits).

See Special Allowance for Credits FromActive Participation in Rental Real EstateActivities below.

Special Allowance for Credits FromActive Participation in Rental RealEstate ActivitiesIf you actively participated in a passive rentalreal estate activity, you may be able to claimcredits from the activity for the tax attributableto a special allowance of up to $25,000,reduced by any passive losses allowed underthis exception on Form 8582. The specialallowance also applies to low-income housing

credits and rehabilitation credits from a rentalreal estate activity, even if you did not activelyparticipate in the activity. The credits allowedunder the special allowance are in addition tothe credits allowed for the tax attributable to netpassive income.

Married individuals filing separate returnswho did not live apart at all times during theyear and trusts cannot use the specialallowance. An estate can use the specialallowance only for its tax years ending lessthan 2 years after the decedent's death.

Only individuals and qualifying estates canactively participate in a rental real estateactivity. Limited partners cannot activelyparticipate unless future regulations provide anexception. In addition, you are not consideredto actively participate in a rental real estate

activity if at any time during the tax year yourinterest (including your spouse's interest) in theactivity was less than 10% (by value) of allinterests in the activity.

Active participation is a less stringentrequirement than material participation (seeMaterial Participation on page 3). You maybe treated as actively participating if youparticipated, for example, in makingmanagement decisions or arranging for othersto provide services (such as repairs) in asignificant and bona fide sense. Managementdecisions that can count as active participationinclude approving new tenants, deciding onrental terms, approving capital or repairexpenditures, and other similar decisions.

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An estate is treated as actively participatingfor tax years ending less than 2 years after thedate of the decedent's death if the decedentwould have satisfied the active participationrequirements for the activity for the tax year inwhich the decedent died. Such an estate is aqualifying estate.

The maximum special allowance that singleindividuals and married individuals filing a jointreturn for the tax year can qualify for is$25,000. The maximum is $12,500 in the caseof married individuals who file separate returnsfor the tax year but only if they lived apart atall times during the tax year. The maximum

special allowance for which an estate canqualify is $25,000 reduced by the specialallowance for which the surviving spousequalified.

If your modified adjusted gross income(defined on page 8) is $100,000 or less($50,000 or less if married filing separately),figure your credits based on the amount of themaximum special allowance referred to in thepreceding paragraph. If your modified adjustedgross income is more than $100,000 ($50,000if married filing separately), the specialallowance is limited to 50% of the differencebetween $150,000 ($75,000 if married filingseparately) and your modified adjusted grossincome. When modified adjusted gross incomeis $150,000 or more ($75,000 or more ifmarried filing separately), there is no special

allowance.However, for low-income housing credits for

property placed in service before 1990, andrehabilitation credits, the limits on modifiedadjusted gross income are increased. If yourmodified adjusted gross income is more than$200,000 ($100,000 if married filingseparately), the special allowance is limited to50% of the difference between $250,000($125,000 if married filing separately), and yourmodified adjusted gross income. Whenmodified adjusted gross income is $250,000or more ($125,000 or more if married filingseparately), there is no special allowance.

The modified adjusted gross incomelimitation does not apply when figuring thespecial allowance for low-income housingcredits for property placed in service after 1989

(other than from a pass-through entity in whichyou acquired your interest before 1990).Reporting credits from rental real estateactivities. Complete Part I first to determineyour credits from all rental real estate activitiesand your passive activity credit. You have apassive activity credit if line 7 shows an amountother than zero. Complete Part II if you havecredits (other than low-income housing andrehabilitation credits) from rental real estateactivities in which you actively participated.Complete Part III if you have low-incomehousing credits from property placed in servicebefore 1990 (or any low-income housing creditsfrom a pass-through entity in which youacquired your interest before 1990), orrehabilitation credits from rental real estateactivities. Complete Part IV if you have

low-income housing credits for property placedin service after 1989 (other than from apass-through entity in which you acquired yourinterest before 1990).

Trade or Business ActivitiesA trade or business activity is an activity (otherthan a rental activity or an activity treated asincidental to an activity of holding property forinvestment) that:1. Involves the conduct of a trade orbusiness (within the meaning of section 162),2. Is conducted in anticipation of starting atrade or business, or

3. Involves research or experimentalexpenditures deductible under section 174 (orthat would be if you chose to deduct rather thancapitalize them).

Reporting Credits From theActivitiesTrade or business activities with materialparticipation. If you materially participatedin a trade or business activity, the activity is nota passive activity. Report the credits from theactivity on the form you normally use.Trade or business activities without

material participation. If you did notmaterially participate in a trade or businessactivity, the activity is a passive activity. Ingeneral, you must use Worksheet 4 on page10 to determine the amount to enter on Form8582-CR for each trade or business activity inwhich you did not materially participate.However, if you held the activity through a PTP,special rules apply. See Publicly TradedPartnerships (PTPs) on page 13.

Material ParticipationIn general. Participation, for purposes of thematerial participation tests listed below,generally includes any work you did for anactivity if you owned an interest in the activityat the time you did the work. The capacity inwhich you did the work does not matter.However, work is not treated as participation ifit is not work that an owner would customarilydo in the same type of activity and one of yourmain reasons for doing the work was to avoidthe disallowance of losses or credits from theactivity under the passive activity rules.Tests for Investors. Work you did as aninvestor in an activity is not treated asparticipation unless you were directly involvedin the day-to-day management or operationsof the activity. Work done as an investorincludes:1. Studying and reviewing financialstatements or reports on operations of theactivity.2. Preparing or compiling summaries oranalyses of the finances or operations of the

activity for your own use.3. Monitoring the finances or operations ofthe activity in a nonmanagerial capacity.Proof of Participation. You may prove yourparticipation in an activity by any reasonablemeans. You do not have to maintaincontemporaneous daily time reports, logs, orsimilar documents if you can establish yourparticipation by other reasonable means.Reasonable means for this purpose mayinclude, but are not limited to, identifyingservices performed over a period of time andthe approximate number of hours spentperforming the services during that period,based on appointment books, calendars, ornarrative summaries.Tests for Spouse. Participation by yourspouse during the tax year in an activity you

own may be counted as your participation inthe activity. Your spouse's participation may beincluded as your participation even if yourspouse did not own an interest in the activityand whether or not you and your spouse file a

joint return for the tax year.Tests for individuals. You materiallyparticipated for the tax year in an activity if yousatisfy one or more of the following tests:1. You participated in the activity for morethan 500 hours.2. Your participation in the activity for the taxyear was substantially all of the participation inthe activity of all individuals (includingindividuals who did not own any interest in theactivity) for the year.

3. You participated in the activity for morethan 100 hours during the tax year, and youparticipated at least as much as any otherindividual (including individuals who did notown any interest in the activity) for the year.4. The activity is a significant participationactivity for the tax year, and you participated inall significant participation activities during theyear for more than 500 hours. A significantparticipation activity is any trade or businessactivity in which you participated for more than100 hours during the year and in which you didnot materially participate under any of the othermaterial participation tests.

5. You materially participated in the activityfor any 5 (whether or not consecutive) of the10 preceding tax years. When determining ifyou materially participated in tax yearsbeginning before 1987 (other than a tax yearof a partnership, an S corporation, an estate,or a trust ending after 1986), you materiallyparticipated only if you participated for morethan 500 hours during the tax year.6. The activity is a personal service activityin which you materially participated for any 3(whether or not consecutive) preceding taxyears. When determining whether youmaterially participated for tax years beginningbefore 1987 (other than a tax year of apartnership, an S corporation, an estate, ortrust ending after 1986), you materiallyparticipated only if you participated for more

than 500 hours during the tax year.An activity is a personal service activity if it

involves performing personal services in thefields of health, law, engineering, architecture,accounting, actuarial science, performing arts,consulting, or any other trade or business inwhich capital is not a materialincome-producing factor.7. Based on all the facts and circumstances,you participated in the activity on a regular,continuous, and substantial basis during the taxyear.

You did not materially participate in theactivity under this seventh test, however, if youparticipated in the activity for 100 hours or lessduring the tax year. Your participation inmanaging the activity does not count indetermining whether you materially participated

under this test if:a. Any person (except you) receivedcompensation for performing services in themanagement of the activity; orb. Any individual spent more hours duringthe tax year than you spent performing servicesin the management of the activity (regardlessof whether the individual was compensated forthe management services).

Special rules for limited partners. If youare a limited partner in an activity, yougenerally did not materially participate in theactivity. You did materially participate in theactivity, however, if you met materialparticipation tests 1, 5, or 6 above for the taxyear.

You are not treated as a limited partner forthe material participation tests, however, if youwere a general partner in the partnership at alltimes during the partnership's tax year endingwith or within your tax year (or, if shorter,during the portion of the partnership's tax yearin which you directly or indirectly owned yourlimited partner interest).

Special rules for certain retired ordisabled farmers and surviving spouses offarmers. Certain retired or disabled farmersand surviving spouses of farmers are treatedas materially participating in a farming activityif the real property used in the activity meetsthe estate tax rules for special valuation of farmproperty passed from a qualifying decedent.

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See Temporary Regulations section1.469-5T(h)(2).Estates and trusts. The passive activitycredit limitations apply to an estate or trust. SeeTemporary Regulations sections1.469-1T(b)(2) and (3). The rules fordetermining material participation for thispurpose have not yet been issued.

Grouping Your ActivitiesGenerally, one or more trade or businessactivities or rental activities may be treated asa single activity if the activities make up an

appropriate economic unit for the measurementof gain or loss under the passive activity rules.Whether activities make up an appropriateeconomic unit depends on all the relevant factsand circumstances. The factors given thegreatest weight in determining whetheractivities make up an appropriate economicunit are:1. Similarities and differences in types oftrades or businesses,2. The extent of common control,3. The extent of common ownership,4. Geographical location, and5. Reliance between or among the activities.

Example. You have a significant ownershipinterest in a bakery and a movie theater inBaltimore and in a bakery and a movie theater

in Philadelphia. Depending on all the relevantfacts and circumstances, there may be morethan one reasonable method for grouping youractivities. For instance, the following groupingsmay or may not be permissible: a singleactivity, a movie theater activity and a bakeryactivity, a Baltimore activity and a Philadelphiaactivity, or four separate activities.

Once you choose a grouping under theserules, you must continue using that grouping inlater tax years unless a material change in thefacts and circumstances makes it clearlyinappropriate.

The IRS may regroup your activities if yourgrouping fails to reflect one or more appropriateeconomic units and one of the primarypurposes of your grouping is to avoid thepassive activity limitations.Limitation on grouping certain activities.The following activities may not be groupedtogether:

1. A rental activity with a trade or businessactivity unless the activities being groupedtogether make up an appropriate economicunit, anda. The rental activity is insubstantial relativeto the trade or business activity or vice versa,orb. Each owner of the trade or businessactivity has the same proportionate ownershipinterest in the rental activity. If so, the portionof the rental activity involving the rental ofproperty to be used in the trade or businessactivity may be grouped with the trade orbusiness activity.2. An activity involving the rental of realproperty with an activity involving the rental ofpersonal property (except for personal propertyprovided in connection with the real property

or vice versa).3. Any activity with another activity in adifferent type of business and in which you holdan interest as a limited partner or as a limitedentrepreneur (as defined in section 464(e)(2)),if that other activity engages in holding,producing, or distributing motion picture filmsor videotapes; farming; leasing section 1245property; or exploring for (or exploiting) oil andgas resources or geothermal deposits.

Activities conducted through partnershipsor S corporations, and C corporationssubject to section 469. Once a partnershipor corporation determines its activities underthese rules, a partner or shareholder may usethese rules to group those activities with eachother, with activities conducted directly by thepartner or shareholder, and with activitiesconducted through other partnerships andcorporations. A partner or shareholder may nottreat as separate activities those activitiesgrouped together by the partnership orcorporation.Partial disposition of an activity. You may

treat the disposition of substantially all of anactivity as a separate activity if you can provewith reasonable certainty:1. The prior year unallowed losses, if any,allocable to the part of the activity disposed of,and2. The net income or loss for the year ofdisposition allocable to the part of the activitydisposed of.

DispositionsUnallowed passive activity credits, unlikeunallowed passive activity losses, are notallowable when you dispose of your interest inan activity. However, you may elect to increasethe basis of the credit property by the amountof the original basis reduction of the property

to the extent that the credit has not beenallowed under the passive activity rules.Unallowed passive activity credits that are notused to increase the basis of the credit propertyare carried forward until they are allowed. Tomake the election, complete Part VI of Form8582-CR. No basis adjustment may be electedon a partial disposition of your interest in apassive activity.

Mr. Jones received a Schedule K-1 from the partnership. The low-income housing credit is shown on line 13(a)(3) of Schedule K-1because the property was placed in service after 1989 (post-1989 low-income housing credit).

Example of How To Complete Form 8582-CRIn 1996, John Jones purchased an interest as a limited partner in Partnership A. Mr. Jones is married and files a joint return. During1996, the partnership placed in service a residential rental building that qualified for the low-income housing credit.

Schedule K-1:

Mr. Joness net passive income for 1996 is zero.

12,000

Low-income housing credit:13a

a(1)(1) From section 42(j)(5) partnerships for property placed in

service before 1990

a(2)(2) Other than on line 13a(1) for property placed in service before 1990Form 8586, line 5

a(3)(3) From section 42(j)(5) partnerships for property placed in

service after 1989a(4)(4) Other than on line 13a(3) for property placed in service after 1989

Qualified rehabilitation expenditures related to rental real estate

activities

bCredits

13b

Credits (other than credits shown on lines 13a and 13b) related

to rental real estate activities

c See page 8 of PartnersInstructions for Schedule K-1(Form 1065).

13c

Credits related to other rental activitiesd 13d

Other credits14 14

Schedule K-1 (Form 1065) 1996For Paperwork Reduction Act Notice, see Instructions for Form 1065.

Cat. No. 11394R

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Form 8582-CR, Passive Activity Credit Limitations.

Step 1.Mr. Jones will need the following forms to report the low-income housing credit:

Mr. Jones follows the instructions for line 13a of Schedule K-1 and enters the employer identification number (EIN) of the partnershipand the $12,000 low-income housing credit on line 5 of Form 8586, and completes line 6.

Form 8586, Low-Income Housing Credit.

John and Mary Jones 123-00-4567

10 5566650 12,000

12,000

Step 2.Line 7 of Form 8586 asks for the passive activity credit for 1996. The amount is figured on Form 8582-CR and theworksheets.

Worksheet 3 for Lines 3a and 3b

Total. Enter on lines 3a and 3b of Form 8582-CR

Worksheet 3 of Form 8582-CR is used for post-1989 low-income housing credits.

(keep for your records)Prior YearUnallowed Credits

Current YearCredits

Total CreditsFromFormName of Activity

(c) Add cols. (a) and (b)(b) Credit line 3b(a) Credit line 3a

12,000Partnership A

12,000

8586

OMB No. 1545-0984

Form 8586 Low-Income Housing Credit

Department of the TreasuryInternal Revenue Service

AttachmentSequence No. 36b Attach to your return.

Name(s) shown on return Identifying number

Current Year Low-Income Housing Credit (See instructions.)

Number of Forms 8609 attached 12Eligible basis of building(s) (total from attached Schedule(s) A (Form 8609), line 1)2

3aQualified basis of low-income building(s) (total from attached Schedule(s) A (Form 8609), line 3)3a

b Has there been a decrease in the qualified basis of any building(s) since the close of the preceding

(iv)(iii)(ii)(i)4Current year credit (total from attached Schedule(s) A (Form 8609), see instructions)4

If you are a Then enter total of current year housing credit(s) from

a Shareholderb Partnerc Beneficiary

Schedule K-1 (Form 1120S), lines 12b(1) through (4)Schedule K-1 (Form 1065), lines 13a(1) through (4)Schedule K-1 (Form 1041), line 13

5 Credits from flow-through entities (if from more than one entity, see instructions):

5

6 Add lines 4 and 5. (See instructions to find out if you complete Part II or file Form 3800.) 6

Part I

EIN of flow-through entity

7 Passive activity credit or total current year credit for 1996 (see instructions) 7

tax year?

building(s) that had a decreased basis. If more space is needed, attach a schedule to list the BINs.

Yes No If Yes, enter the building identification number (BIN) of the

96

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Mr. Jones follows the instructions for Worksheet 3 and enters the total credits from column (a) of that worksheet on line 3a of Form8582-CR. He enters the total credits on line 3c and completes lines 5 through 7 of the form. Mr. Jones can skip Parts II and III and goto Part IV because the only credit he has is from a post-1989 low-income housing rental real estate activity. He must also complete thecomputation for line 35 in the instructions to get the amount to enter on line 35 of the form.


12,000

-0-

12,000

12,000

12,000

12,000

10,485

-0-

10,485

12,000

12,000

OMB No. 1545-1034Passive Activity Credit LimitationsForm 8582-CR See separate instructions.

Department of the Treasury

Internal Revenue Service

Attachment

Sequence No. 88a Attach to Form 1040 or 1041.Identifying numberName(s) shown on return

1996 Passive Activity CreditsCaution: If you have credits from a publicly traded partnership, seePublicly Traded Partnerships (PTPs)on page 13

of the instructions.

Credits From Rental Real Estate Activities With Active Participation (Other Than RehabilitationCredits and Low-Income Housing Credits) (See Lines 1a through 1c on page 8 of the instructions.)

1aCredits from Worksheet 1, column (a)1a

1bb Prior year unallowed credits from Worksheet 1, column (b)

1cAdd lines 1a and 1bc

Rehabilitation Credits from Rental Real Estate Activities and Low-Income Housing Credits forProperty Placed in Service Before 1990 (or From Pass-Through Interests Acquired Before 1990)(See Lines 2a through 2c on page 8 of the instructions.)

2a2a Credits from Worksheet 2, column (a)

2bb Prior year unallowed credits from Worksheet 2, column (b)

c Add lines 2a and 2b 2c

Low-Income Housing Credits for Property Placed in Service After 1989 (See Lines 3a through3c on page 8 of the instructions.)

3aCredits from Worksheet 3, column (a)3a3bPrior year unallowed credits from Worksheet 3, column (b)b

3cAdd lines 3a and 3bc

All Other Passive Activity Credits (See Lines 4a through 4c on page 8 of the instructions.)

4aCredits from Worksheet 4, column (a)4a4bPrior year unallowed credits from Worksheet 4, column (b)b

4cAdd lines 4a and 4bc5Add lines 1c, 2c, 3c, and 4c56Enter the tax attributable to net passive income (see page 8 of the instructions)6

7 Subtract line 6 from line 5. If line 6 is more than or equal to line 5, enter -0- and see page 8 ofthe instructions 7

Part I

Special Allowance for Low-Income Housing Credits for Property Placed in Service After 1989Note: Complete Part IV if you have an amount on line 3c. Otherwise, go to Part V.

31If you completed Part III, enter the amount from line 19. Otherwise, subtract line 16 from line 731

Enter the amount from line 3032 32

33Subtract line 32 from line 31. If zero, enter -0- here and on line 3633

Enter the smaller of line 3c or line 3334 34

35Tax attributable to the remaining special allowance (see page 10 of the instructions)35

Enter the smaller of line 34 or line 3536 36

Part IV

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Step 3.After completing Form 8582-CR, Mr. Jones determines his allowed and unallowed credit. Because he has only one type ofcredit from a single passive activity, his allowed low-income housing credit for 1996 is the amount on line 37, or $10,485. His unallowedcredit of $1,515 is determined by subtracting the allowed credit on line 37 from the total credit on line 5 ($12,000 $10,485).

Step 4.Mr. Jones enters the allowed passive activity credit of $10,485 on line 7 of Form 8586 and completes Part II of that formaccording to the instructions for Form 8586. The unallowed credit of $1,515 is carried forward and used to figure the passive activitycredit allowed for 1997.

10,485


10 5566650 12,000

12,000

10,485

Line 35 computation:

Line 35.Figure the tax attributable to theremaining special allowance as follows:

Note: When using taxable income in the above computation,it is not necessary to refigure items that are based on apercentage of adjusted gross income.

305,000A. Taxable income

B.

C.

D.

Tax on line A. Use tax table, tax rate schedules, orSchedule D Tax Worksheet (or Schedule D (Form1041)), whichever applies 95,780

E.

Enter $25,000 ($12,500 if married filingseparate return and you and yourspouse lived apart at all times during

the year)25,000

F.

Enter amount from line 9 of Form 8582,if any -0-

25,000

G.

Subtract line D from line C

280,000

H.

Subtract line E from line A

I.

Tax on line F. Use tax table, tax rate schedules, orSchedule D Tax Worksheet (or Schedule D (Form1041)), whichever applies 85,295

10,485

J.

Subtract line G from line B

Add lines 16 and 30 of Form 8582-CR and enterthe total -0-

Subtract line I from line H. Tax attributable to theremaining special allowance. Enter the result online 35 of Form 8582-CR 10,485

Mr. Jones completes Part V of Form 8582-CR:

Passive Activity Credit Allowed

37 Passive Activity Credit Allowed. Add lines 6, 16, 30, and 36. See page 10 of the instructionsto find out how to report the allowed credit on your tax return and how to allocate allowed andunallowed credits if you have more than one credit or credits from more than one activity. If youhave any credits from a publicly traded partnership, see Publicly Traded Partnerships (PTPs)

on page 13 of the instructions 37

Part V

OMB No. 1545-0984

Form 8586 Low-Income Housing Credit

Department of the TreasuryInternal Revenue Service

AttachmentSequence No. 36b Attach to your return.

Name(s) shown on return Identifying number

Current Year Low-Income Housing Credit (See instructions.)

Number of Forms 8609 attached 12Eligible basis of building(s) (total from attached Schedule(s) A (Form 8609), line 1)2

3aQualified basis of low-income building(s) (total from attached Schedule(s) A (Form 8609), line 3)3a

b Has there been a decrease in the qualified basis of any building(s) since the close of the preceding

(iv)(iii)(ii)(i)4Current year credit (total from attached Schedule(s) A (Form 8609), see instructions)4

If you are a Then enter total of current year housing credit(s) from

a Shareholderb Partnerc Beneficiary

Schedule K-1 (Form 1120S), lines 12b(1) through (4)Schedule K-1 (Form 1065), lines 13a(1) through (4)Schedule K-1 (Form 1041), line 13

5 Credits from flow-through entities (if from more than one entity, see instructions):

5

6 Add lines 4 and 5. (See instructions to find out if you complete Part II or file Form 3800.) 6

Part I

EIN of flow-through entity

7 Passive activity credit or total current year credit for 1996 (see instructions) 7

tax year?

building(s) that had a decreased basis. If more space is needed, attach a schedule to list the BINs.

Yes No If Yes, enter the building identification number (BIN) of the

96

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Specific Instructions

Part I

Current Year CreditsConvert any current year qualified expendituresinto credits before beginning Worksheet 1, 2,3, or 4.Form 3800, General Business Credit.Enter the credits from line 2 of Form 3800 in

column (a) of Worksheet 1, 2, 3, or 4. If thecredits are from more than one activity or morethan one type of credit, separate the credits byactivity or type before making entries in theworksheets. For example, if you have alow-income housing credit from one activity anda research credit from a different activity, enterthe low-income housing credit in column (a) ofWorksheet 2 and make a separate entry for theresearch credit in column (a) of Worksheet 4.Form 8586, Low-Income Housing Credit.If you are not required to file Form 3800, enterthe portion of the credit attributable to passiveactivities credit from line 6 of Form 8586 incolumn (a) of Worksheet 2 or 3.Form 8834, Qualified Electric VehicleCredit. Enter the credits from line 10 of Form8834 in column (a) of Worksheet 1 or 4. If the

credits are from more than one activity,separate the credits by activity before makingentries in the worksheet.Form 8844, Empowerment ZoneEmployment Credit. Enter the credits fromline 5 of Form 8844 in column (a) of Worksheet1 or 4. If the credits are from more than oneactivity, separate the credits by activity beforemaking entries in the worksheet.Nonconventional source fuel credit.Figure your credit from passive activities forfuel produced from a nonconventional sourceand enter the credit in column (a) of Worksheet4.

See section 29 for more information on thecredit for fuel produced from a nonconventionalsource.

Prior Year Unallowed CreditsIn figuring this year's passive activity credit, youmust take into account any credits from passiveactivities disallowed for prior years and carriedforward to this year.

If you had only one type of prior yearunallowed credit from a single passive activity,you can figure your prior year unallowed creditby subtracting line 37 of your 1995 Form8582-CR from line 5 of your 1995 Form8582-CR. Otherwise, your prior year unallowedcredits are the amounts shown in column (b)of Worksheet 9 in the 1995 Instructions forForm 8582-CR. Enter the prior year unallowedcredits in column (b) of Worksheet 1, 2, 3, or4, whichever apply.

1996 Passive Activity CreditsLines 1a through 1c. Individuals andqualifying estates that actively participated inrental real estate activities (other than rentalreal estate activities with rehabilitation creditsor low-income housing credits) should includethe credits from these activities on lines 1athrough 1c. Use Worksheet 1 to figure theamounts to enter on lines 1a and 1b.

See Special Allowance for Credits FromActive Participation in Rental Real EstateActivities on page 2.Caution: Include the credits in Worksheet 4and on lines 4a and 4b, but not on lines 1a and1b, if you were married filing a separate return

and lived with your spouse at any time duringthe year, even if you actively participated.Caution: You may take credits that arose ina prior tax year (other than low-income housingand rehabilitation credits) under the specialallowance only if you actively participated in therental real estate activity for both that prior yearand this year. If you did not actively participatefor both years, include the credits in Worksheet4 and on lines 4a and 4b, but not in Worksheet1 or on lines 1a and 1b.

Lines 2a through 2c. Individuals, includinglimited partners, and qualifying estates whohad rehabilitation credits from rental real estateactivities or low-income housing credits forproperty placed in service before 1990 shouldinclude the credits from those activities on lines2a and 2b.

However, if you have low-income housingcredits for property placed in service after1989, include those credits on lines 3a and 3binstead of lines 2a and 2b. If you held anindirect interest in the property through apartnership, S corporation, or otherpass-through entity, use lines 3a and 3b onlyif you also acquired your interest in thepass-through entity after 1989.Caution: Include the credits in Worksheet 4and on lines 4a and 4b, but not on lines 2a, 2b,3a, and 3b, if you were married filing aseparate return and lived with your spouse atany time during the year.

Lines 3a through 3c. Individuals, includinglimited partners, and qualifying estates whohad low-income housing credits from rental realestate activities for property placed in serviceafter 1989, include those credits on lines 3athrough 3c instead of lines 2a through 2c. If youheld an indirect interest in the property througha partnership, S corporation, or otherpass-through entity, use lines 3a through 3conly if you also acquired your interest in thepass-through entity after 1989.Lines 4a through 4c. Individuals shouldinclude on lines 4a through 4c credits frompassive activities that were not entered on lines1a through 1c, lines 2a through 2c, or lines 3athrough 3c. Trusts should include credits fromALL passive activities on lines 4a through 4c.Line 6. If line 3 of Form 8582 shows netincome, or if you did not complete Form 8582because you had net passive income, you willhave to figure the tax on the net passiveincome. If you have an overall loss on an entiredisposition of your interest in a passive activity,reduce net passive income, if any, on line 3 ofForm 8582 to the extent of the loss (but notbelow zero) and use only the remaining netpassive income in the computation below. Ifyou had a net passive activity loss, enter zeroon line 6 and go on to line 7.

Figure the tax on net passive income asfollows:

Note: When using taxable income in theabove computation, it is not necessary torefigure items that are based on a percentageof adjusted gross income.

Line 7. If line 7 is zero because the tax onthe net passive income on line 6 is greater thanyour credits from passive activities on line 5,all your credits from passive activities areallowed. In this case, enter the amount fromline 5 on line 37 and report the credits on theform you normally use. Do not completeWorksheets 5 through 9.

Part IILine 9. Married persons filing separatereturns who lived apart at all times during theyear should enter $75,000 on line 9 instead of

$150,000. Married persons filing separatereturns who lived together at any time duringthe year are not eligible to complete Part II.Line 10. To figure modified adjusted grossincome for this line, combine all of theamounts you would use to figure adjustedgross income, except do not take into account:q Any passive activity loss as defined insection 469(d)(1),q Any rental real estate losses allowed undersection 469(c)(7) to real estate professionals(defined under Activities That Are NotPassive Activities on page 1),q Any taxable social security or equivalentrailroad retirement benefits,q Any deductible contributions to an IRA orcertain other qualified retirement plans undersection 219,q The deduction allowed under section 164(f)for one-half of self-employment taxes, orq The exclusion from income of interest fromseries EE U.S. savings bonds used to payhigher education expenses.

An overall loss from an entire disposition ofan interest in a passive activity is taken intoaccount when figuring modified adjusted grossincome if you do not have any net income aftercombining net income and losses from all otherpassive activities (i.e., line 3 of Form 8582 is aloss or zero). If you do have net income whenyou combine all of the net losses and netincome from all other passive activities, theoverall loss from the activity disposed of ispassive to the extent of the net income andnonpassive to the extent that it exceeds the netincome. Take into account the nonpassiveportion of the loss when figuring modifiedadjusted gross income.

Include any overall net income from passiveactivities from publicly traded partnerships, anynet income from significant participationpassive activities, and any other net passiveincome treated as nonpassive income underTemporary Regulations section 1.469-2T(f) orRegulations section 1.469-2(f).Line 12. Do not enter more than $12,500 online 12 if you are married filing a separatereturn and you and your spouse lived apart atall times during the year. Married persons filingseparate returns who lived together at any timeduring the year are not eligible to complete PartII.Line 15. Figure the tax attributable to the

amount on line 14 as follows:

A. Taxable income includingnet passive income .........

B. Tax on line A. Use tax table, tax rateschedules, or Schedule D Tax

Worksheet (or Schedule D (Form1041)), whichever applies ............... ...A. Taxable income...............

C. Taxable income withoutnet passive income ......... B. Tax on line A. Use tax table, tax rate

schedules, or Schedule D TaxWorksheet (or Schedule D (Form1041)), whichever applies ................. .

D. Tax on line C. Use tax table, tax rateschedules, or Schedule D TaxWorksheet (or Schedule D (Form1041)), whichever applies ............... ... C. Enter amount from line A

above ..............................E. Subtract line D from line B and enterthe result on line 6 of Form 8582-CR. D. Enter amount from line

14 of Form 8582-CR.......E. Subtract line D from line

C ......................................

Page 8


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F. Tax on line E. Use tax table, tax rateschedules, or Schedule D TaxWorksheet (or Schedule D (Form1041)), whichever applies ................. .

Note: When using taxable income in theabove computation, it is not necessary torefigure items that are based on a percentageof adjusted gross income.G. Subtract line F from line B and enter

the result on line 15 of Form 8582-CR.

Lines 1a and 1b.Use Worksheet 1 to figure the amounts to enter on lines 1a and 1b. Line 1a is used for credits from rental realestate activities with active participation for the current year and line 1b is used for prior year unallowed credits from rental real estateactivities with active participation in both the prior year in which the credit arose and the current year. See instructions for SpecialAllowance for Credits From Active Participation in Rental Real Estate Activities on page 2 for a definition of active participation.

After you complete the worksheet below, enter the totals of columns (a) and (b) on the corresponding lines of Form 8582-CR andthen complete line 1c.

Note: Rehabilitation credits from rental real estate activities and low-income housing credits should be entered in Worksheet 2 or 3,whichever applies, even if you actively participated in the activity.

(keep for your records)Worksheet 1 for Lines 1a and 1bPrior Year

Unallowed CreditsCurrent Year

CreditsTotal Credits

FromFormName of Activity


Totals. Enter on lines 1a and 1b of Form 8582-CR

Lines 2a and 2b.Use Worksheet 2 to figure the amounts to enter on lines 2a and 2b. Line 2a is used for rehabilitation credits andlow-income housing credits from rental real estate activities for the current year and line 2b is used for prior year unallowed credits fromthose activities. However, use Worksheet 3 instead of Worksheet 2 if you have any low-income housing credits for property placed inservice after 1989. If you held an indirect interest in the property through a partnership, S corporation, or other pass-through entity, useWorksheet 3 only if you also acquired your interest in the pass-through entity after 1989. Use this worksheet if you do not meet bothrequirements.








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Lines 3a and 3b.Use Worksheet 3 to figure the amounts to enter on lines 3a and 3b for low-income housing credits for propertyplaced in service after 1989. If you held an indirect interest in the property through a partnership, S corporation, or other pass-throughentity, use Worksheet 3 only if you also acquired your interest in the pass-through entity after 1989. Line 3a is used for the current yearcredits and line 3b is used for prior year unallowed credits for those activities.

Worksheet 3 for Lines 3a and 3b

Total. Enter on lines 3a and 3b of Form 8582-CR


(keep for your records)Prior Year





Lines 4a and 4b.Use Worksheet 4 to figure the amounts to enter on lines 4a and 4b. Line 4a is used for credits from all other passiveactivities for the current year and line 4b is used for prior year unallowed credits from those activities.








Part IIILine 21. Married persons filing separatereturns who lived apart at all times during the

year should enter $125,000 on line 21 insteadof $250,000. Married persons filing separatereturns who lived together at any time duringthe year are not eligible to complete Part III.

Skip lines 21 through 26 if you completedPart II of this form and your modified adjustedgross income on line 10 in Part II was $100,000or less ($50,000 or less if married filingseparately and you lived apart from yourspouse for the entire year). If this was the case,enter the amount from line 15 on line 27.Line 24. Do not enter more than $12,500 online 24 if you are married filing a separatereturn and you and your spouse lived apart atall times during the year. Married persons filingseparate returns who lived together at any timeduring the year are not eligible to complete PartIII.

Line 27. Figure the tax attributable to theamount on line 26 as follows:


Part IVNote: Married persons filing separate returnswho lived together at any time during the yearare not eligible to complete Part IV.

Line 35. Figure the tax attributable to theremaining special allowance as follows:

F. Tax on line E. Use tax table, tax rateschedules, or Schedule D TaxWorksheet (or Schedule D (Form1041)), whichever applies ................ .....


Part V

Passive Activity Credit AllowedLine 37. If you have only one type of credit,the amount on line 37 is the credit allowed forthe year. Enter this amount on the form whereit is normally reported. See Reporting AllowedCredits on Your Tax Return below. Yourunallowed credit would be line 5 minus line 37.

Use Worksheets 5 through 9, whicheverapply, on pages 11 and 12, to allocate theallowed and unallowed credits if you havecredits from more than one activity. Also usethe worksheets if you must allocate the creditsbecause they are reported on different forms.

Keep a record of each unallowed credit andthe activity to which it belongs so you can claimthe credit if it becomes allowable in a futureyear.

Reporting Allowed Credits on YourTax ReturnForm 3800. Enter on line 4 of Form 3800 thetotal passive activity general business creditallowed.

H. Subtract line G from line B....................I. Add lines 16 and 30 of Form 8582-CR

and enter the total ................. ................J. Subtract line I from line H. Tax

attributable to the remaining special

allowance. Enter the result on line 35of Form 8582-CR...................................

G. Subtract line F from line B and enter the

result on line 27 of Form 8582-CR .......

A. Taxable income.....................

B. Tax on line A. Use tax table, tax rateschedules, or Schedule D TaxWorksheet (or Schedule D (Form

1041)), whichever applies ................ .....C. Enter $25,000

($12,500 if marriedfiling separatereturn and you andyour spouse livedapart at all timesduring the year) ....

A. Taxable income.....................

B. Tax on line A. Use tax table, tax rateschedules, or Schedule D TaxWorksheet (or Schedule D (Form1041)), whichever applies ................. ....

D. Enter amount fromline 9 of Form8582, if any...........

C. Enter amount from line Aabove ....................................

D. Enter amount from line 26 ofForm 8582-CR ...................... E. Subtract line D from line C ...

F. Subtract line E from line A....E. Subtract line D from line C ...

G. Tax on line F. Use tax table, tax rateschedules, or Schedule D TaxWorksheet (or Schedule D (Form1041)), whichever applies ................ .....

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Form 8586. If you are not required to fileForm 3800, enter on line 7 of Form 8586 anyallowed low-income housing credit.Form 8834. Enter on line 12 of Form 8834the passive activity qualified electric vehiclecredit allowed.

Form 8844. Enter on line 7 of Form 8844 thepassive activity empowerment zoneemployment credit allowed.Nonconventional source fuel credit. If youhave an allowed passive activity credit for fuelproduced from a nonconventional source, seesection 29 for limitations and adjustments to

the credit. Attach a separate schedule to yourtax return showing how you figured the credit.If you have both passive and nonpassivecredits, combine the credits before applying thelimitations and adjustments. Report the crediton the line specified by the instructions for thetax return you file.

Instructions for Worksheet 5

Complete Worksheet 5 if you have an amount on line 1c of Form 8582-CR and you have credits from more than one activity.

Column (a).Enter the credits from Worksheet 1, column (c), in column (a) of this worksheet.

Column (b).Divide each of the credits shown in column (a) by the total of the credits in column (a) and enter the ratio for each of theactivities in column (b). The total of all ratios should equal 1.00.

Column (c).Multiply line 16 of Form 8582-CR by the ratios in column (b) and enter the result in column (c). If the total of this columnis the same as the total of column (a), all of the credits for the activities in column (a) of this worksheet are allowed. Report them on theforms you normally report them on and complete Worksheet 6 if you have credits shown in Worksheet 2. Also complete Worksheet 7 or8 if you have credits shown in Worksheet 3 or 4. If the total of column (a) is more than the total of column (c), complete column (d).

Column (d).Subtract column (c) from column (a) and enter the result in this column. Also enter the name of each activity and the formthe credit should be reported on in Worksheet 8 and enter the amount from column (d) of this worksheet in column (a) of Worksheet 8.Also complete Worksheet 6 or 7 if you have credits on line 2c or 3c of Form 8582-CR.

(keep for your records)Worksheet 5 for Credits on Line 1a or 1b

(b) Ratios(c) SpecialAllowance

(d) Subtractcolumn (c) from

column (a)(a) Credits

Form To BeReported onName of Activity

Totals 1.00

Instructions for Worksheet 6Complete Worksheet 6 if you have credits on line 2c of Form 8582-CR and you have credits from more than one activity.


Column (b).Divide each of the individual credits shown in column (a) by the total of all the credits in column (a) and enter the ratiosfor each of the activities in column (b). The total of all the ratios should equal 1.00.

Column (c).Multiply line 30 of Form 8582-CR by the ratios in column (b) and enter the result in column (c). If the total of this columnis the same as the total of column (a), all the credits for the activities in column (a) of this worksheet are allowed. Report them on theforms you normally report them on and complete Worksheet 7 or 8 if you have credits shown in Worksheet 3 or 4 or amounts in column(d) of Worksheet 5. If the total of column (a) is more than the total of column (c), complete column (d).

Column (d).Subtract column (c) from column (a) and enter the result in this column. Also enter the name of each activity and the formthe credit should be reported on in Worksheet 8 and enter the amount from column (d) of this worksheet in column (a) of Worksheet 8.



column (a)

(c) SpecialAllowance

(b) Ratios(a) CreditsForm To BeReported onName of Activity

1.00Totals

Page 11


12/13

Instructions for Worksheet 8

Complete Worksheet 8 if you have credits on line 4c of Form 8582-CR from more than one activity or reported on different forms, oryou have amounts in column (d) of Worksheets 5, 6, or 7.

Column (a).Enter the amounts, if any, from column (c) of Worksheet 4 and column (d) of Worksheets 5, 6, and 7.

Column (b).Divide each of the credits in column (a) by the total of all the credits in column (a). The total of all the ratios should equal1.00.

Column (c).Complete the following computation:

A. Enter line 5 of Form 8582-CR

B. Enter line 37 of Form 8582-CR

C. Subtract line B from line A

Multiply line C by the ratios in column (b) and enter the results in column (c). Complete Worksheet 9 to determine the credits allowedfor 1996.

(keep for your records)Worksheet 8Allocation of Unallowed Credits

(c) Unallowed Credits(b) Ratios(a) CreditsForm To BeReported onName of Activity

1.00Totals

Instructions for Worksheet 9Column (a).Enter all the activities shown in Worksheet 8. The credits entered in column (a) of this worksheet should be the creditsshown in column (c) of Worksheets 1, 2, 3, and 4 for the activities listed in Worksheet 8.

Column (b).Enter the amounts from column (c) of Worksheet 8 in this column. These are your unallowed credits for 1996.

Column (c).Subtract column (b) from column (a). These are the credits allowed for 1996. The amounts in this column should be

reported on the forms you normally use to report the credits. See Reporting Allowed Credits on Your Tax Return on page 10.

(keep for your records)Worksheet 9Allowed Credits

(c) Allowed Credits(b) Unallowed Credits(a) CreditsForm To BeReported on

Name of Activity

Totals

Instructions for Worksheet 7Complete Worksheet 7 if you have credits on line 3c of Form 8582-CR and you have credits from more than one activity.


Column (b).Divide each of the individual credits shown in column (a) by the total of all the credits in column (a) and enter the ratiosfor each of the activities in column (b). The total of all the ratios should equal 1.00.

Column (c).Multiply line 36 of Form 8582-CR by the ratios in column (b) and enter the result in column (c). If the total of this columnis the same as the total of column (a), all the credits for the activities in column (a) of this worksheet are allowed. Report them on theforms you normally report them on and complete Worksheet 8 if you have credits shown in Worksheet 4 or amounts in column (d) ofWorksheet 5 or 6. If the total of column (a) is more than the total of column (c), complete column (d).Column (d).Subtract column (c) from column (a) and enter the result in this column. Also enter the name of each activity and the formthe credit should be reported on in Worksheet 8 and enter the amount from column (d) of this worksheet in column (a) of Worksheet 8.



column (a)

(c) SpecialAllowance

(b) Ratios(a) CreditsForm To BeReported on

Name of Activity

1.00Totals

Page 12


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Publicly Traded Partnerships(PTPs)A PTP is a partnership whose interests aretraded on an established securities market orare readily traded on a secondary market (orits substantial equivalent).

An established securities market includesany national securities exchange and any localexchange registered under the SecuritiesExchange Act of 1934 or exempted fromregistration because of the limited volume oftransactions. It also includes any

over-the-counter market.A secondary market generally exists wherea person stands ready to make a market in theinterest. An interest is treated as readilytradable if the interest is regularly quoted bypersons, such as brokers or dealers, who aremaking a market in the interest.

The substantial equivalent of a secondarymarket exists where there is no identifiablemarket maker, but the holder of an interest hasa readily available, regular, and ongoingopportunity to sell or exchange his or herinterest through a public means of obtaining orproviding information of offers to buy, sell, orexchange interests. Similarly, the substantialequivalent of a secondary market exists wherethe prospective buyers and sellers have theopportunity to buy, sell, or exchange interests

in a timeframe and with the regularity andcontinuity that the existence of a market makerwould provide.

Credits From PTPsA credit from a passive activity held through aPTP is allowed to the extent of the taxattributable to net passive income from thatpartnership. In addition, rehabilitation creditsand low-income housing credits from rental realestate activities held through PTPs are allowedto the extent of any special allowance thatremains after taking into account losses andcredits from rental real estate activities notowned through PTPs. See Special Allowancefor Credits From Active Participation inRental Real Estate Activities on page 2.

Do not enter credits from PTPs on the

worksheets or on Form 8582-CR. Instead, usethe following steps to figure the allowed andunallowed credits from passive activities heldthrough PTPs.

Computation of Passive ActivityCredits Allowed From PTPsComplete Steps 1 and 2 only if you have netpassive income from a PTP with passiveactivity credits (including prior year unallowedcredits).

Step 1. Figure the tax attributable to netpassive income from each PTP with passiveactivity credits (including prior year unallowed

credits) by following the steps shown in theworksheet in the line 6 instructions. Completea separate tax computation for each PTP withnet passive income.Step 2. Passive activity credits from eachPTP are allowed to the extent of the taxattributable to net passive income from thatsame PTP. Credits in excess of the taxattributable to net passive income may beallowed under one or more steps below.

Complete Steps 3 through 5 only if you haverehabilitation credits from rental real estateactivities from a PTP, low-income housingcredits for property placed in service before1990 from a PTP, or low-income housingcredits from a PTP in which you acquired yourinterest before 1990 (regardless of the dateplaced in service) (including prior yearunallowed credits).

Step 3. Reduce rehabilitation credits fromrental real estate activities from each PTP,low-income housing credits for property placedin service before 1990 from each PTP, and anylow-income housing credits (including prioryear unallowed credits) from each PTP inwhich you acquired your interest before 1990(regardless of the date placed in service) to theextent of the tax attributable to net passiveincome from that PTP, which was figured inStep 1.Step 4. Before beginning this step, you mustcomplete Form 8582-CR if you have anypassive credits that are not from PTPs.Subtract the total of lines 16, 30, and 36, if any,of Form 8582-CR, from the amount on line 27of Form 8582-CR, to figure the tax attributableto the special allowance available for thecredits in Step 3.

If your only passive credits are from PTPs,complete lines 21 through 27 of Form 8582-CRas a worksheet. The amount on line 27 is thetax attributable to the special allowanceavailable for the credits in Step 3.Step 5. Rehabilitation credits from rental realestate activities of each PTP, low-incomehousing credits for property placed in servicebefore 1990 by each PTP, and any low-incomehousing credits from a PTP in which youacquired your interest before 1990 (regardlessof the date placed in service) allowed under the

special allowance are the smaller of the totalcredits from Step 3 or the amount figured inStep 4. If Step 4 is smaller than Step 3, allocatethe amount in Step 4 pro rata to the creditsfrom each PTP in Step 3.

Complete Steps 6 through 8 only if you havelow-income housing credits for property placedin service after 1989 from a PTP in which youalso acquired your interest after 1989 (includingprior year unallowed credits).

Step 6. Reduce low-income housing creditsfor property placed in service after 1989 froma PTP in which you also acquired your interest

after 1989 (including prior year unallowedcredits) to the extent of the tax attributable tonet passive income from that PTP, which wasfigured in Step 1.Step 7. Before beginning this step, you mustcomplete Form 8582-CR if you have anypassive credits that are not from PTPs.Subtract the sum of the credits allowed in Step5 above and line 36 of Form 8582-CR from theamount on line 35 of Form 8582-CR to figurethe tax attributable to the special allowanceavailable for the credits in Step 6.

If your only passive credits are from PTPs,complete the steps shown in the worksheet inthe line 35 instructions. Subtract the creditsallowed in Step 5 above from the tax figuredon line J of that worksheet. The result is the taxattributable to the special allowance availablefor the credits in Step 6.Step 8. Low-income housing credits allowedunder the special allowance for property placedin service after 1989 from a PTP in which youalso acquired your interest after 1989 are thesmaller of the total credits from Step 6 or theamount figured in Step 7. If Step 7 is smallerthan Step 6, allocate the amount in Step 7 prorata to the credits from each PTP in Step 6.Step 9. Add Steps 2, 5, and 8. These are thetotal credits allowed from passive activities ofPTPs.Step 10. Figure the allowed and unallowedcredits from each PTP. Report the allowedcredits on the form normally used. Keep arecord of the unallowed credits to be carriedforward to 1997.

Part VIElection To IncreaseBasis of Credit PropertyLine 38. Check the box if you elect toincrease the basis of credit property used in apassive activity by the unallowed credit thatreduced the property's basis. The election isavailable for a fully taxable disposition of anentire interest in an activity for which a basisadjustment was made as a result of placing inservice property for which a credit was taken.On such a disposition, you may elect toincrease the basis of the credit property

immediately before the disposition (by anamount no greater than the amount of theoriginal basis reduction) to the extent that thecredit had not previously been allowed becauseof the passive credit limitations. The amountof the unallowed credit that may then beapplied against tax is reduced by the amountof the basis adjustment.

No basis adjustment may be elected on apartial disposition of your interest in a passiveactivity or if the disposition is not fully taxable.The amount of any unallowed credit, however,remains available to offset the tax attributableto net passive income.

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Documents

US Internal Revenue Service: i8582cr--1996